While most government officials scratch and claw for more authority, Federal Housing Administration Commissioner Brian Montgomery is pouring cold water on a housing rescue plan that would make his agency the linchpin of an expanded federal effort to keep people in their homes.
The House of Representatives last week passed a bill championed by House Financial Services Chairman Barney Frank that would enable struggling borrowers to refinance into more affordable loans guaranteed by the government. The legislation would require a significant expansion of the FHA—an idea recently endorsed by Federal Reserve Chief Ben Bernanke.
But speaking to a roomful of real estate agents this morning at the National Association of Realtors Midyear Legislative Meetings and Trade Expo, Montgomery expressed his opposition to the legislation recently passed by the House:
As one colleague described it, it is "on steroids" because it throws sound underwriting out the window. It moves us toward a federalization of the mortgage market, forces taxpayers to pay for bad loans, and doubles FHA's portfolio, adding hundreds of thousands of risky loans in a Byzantine process that will take years to sort out and create a regulatory nightmare.
Of course, there is room for compromise. We share the same goals. But we need to make this bill more workable and fiscally sound. I think the president is right to veto the bill in its current form. But I also think that we, those of us in this room and others, can come up with helpful legislation if we can achieve a common vision about the solution, if there is a willingness to compromise, and if there is a willingness to direct efforts to help those who have tried to be responsible borrowers and not reward those who rolled the dice and lost.
We have to look past the current crisis to the future. We want to help people keep their homes. We also want to lay a foundation for a more stable housing market in the future, a market with proper incentives and a smoother housing cycle. We want to promote further, sustainable homeownership. Our future economic strength depends on how we act now in this crisis.
In an interview following the panel discussion, Montgomery made additional remarks about the bill:
"I have no doubt we're all working to the same goal here; the question becomes, at what price? And our mind-set is going forward that taxpayers who had no part in any of this...shouldn't have a bill coming their way. We shouldn't have the U.S. taxpayers providing what would be a payoff to lenders. So that's probably the biggest difference. [The Congressional Budget Office] scored the Frank bill about $1.7 billion [in its cost to taxpayers], and we want to remain self-sustaining, because we are off budget. ... And we normally, at the end of the day, have a surplus that we then give to the U.S. Treasury. And we want to keep the FHA that way.
"There are some other things in there, in the Dodd [Senate] bill in particular, where they set up this oversight board, which I think is a little onerous. Again, I think it's well intentioned, but I don't think we need to go set up another board to have the FHA do what they do every day.
"We could do a lot of this administratively. ... And the Senate Banking [Committee] hearing was probably more telling in that I think that a lot of senators came to realize that the FHA can do a good bit of this on their own, and we are moving out and doing exactly that. But I recognize this is an election year, and people want to get things done on both sides of the aisle. Me, I'm not up for re-election."